Every month the Money Reporter reviews the 20 top income stocks and trusts for the income-focused investor. From those 20 it highlights those it views as being its current choices for new buying based on factors such as price, sector and economic fundamentals.
■ Veresen Inc. (TSX—VSN) owns and operates energy infrastructure assets across North America. The company is engaged in three principal businesses: a pipeline transportation business comprised of interests in the Alliance pipeline, the Ruby pipeline and the Alberta ethane gathering system; a midstream business; and a power business.
For the year ended Dec. 31, 2016, Veresen’s distributable cash was $355 million, or $1.15 a share, compared with $310 million, or $1.06 a share, in 2015.
Alliance contributed about $200 million of this cash, up 20 per cent from 2015, primarily driven by favourable market fundamentals and continued industry-leading reliability and availability, and significant cost reductions.
Meanwhile, Veresen continues to secure additional growth at its midstream segment, with over $1.1 billion of capital projects approved over the past year. Recent projects include the Saturn, Sunrise and Tower gas processing plants in the low-cost Montney Formation of B.C. and Alberta.
To help fund such growth plans, Veresen announced a series of agreements to sell its power generation business for $1.2 billion last August. The sale has also increased the company’s financial flexibility.
Veresen thinks its 2017 distributable cash per share should be in the range of $1.00 to $1.14. The company also continues to expect that Sunrise and Tower will be placed into service near the end of this year, with Saturn Phase II in service by mid-2018. Together, these projects should contribute to a rebound in distributable cash per share in 2018.
Distributable cash should fall to $1.09 a share in 2017, before rebounding in 2018. The stock trades at a reasonable 12.9 times the 2017 cash estimate. The annual dividend of $1.00 a share yields an attractive 7.1 per cent. Veresen is a buy for growth and income.
Here’s another income stock and two income trusts to buy
■ Brookfield Infrastructure Partners (TSX—BIP.UN) is a leading global infrastructure company that owns and operates long-life assets in the utilities, transport, energy and communications sectors across North and South America, Asia Pacific and Europe. It has a strong balance sheet and is well positioned to capitalize on investment opportunities in its market. The units yield 4.6 per cent and are a buy for growth and income.
■ Pembina Pipeline Corp. (TSX—PPL) is a North American transportation and mid-stream service provider. The company’s high-quality assets and integrated structure should let it realize significant growth opportunities while providing shareholders with a relatively defensive investment in the energy sector. The stock yields 4.5 per cent and is a buy for growth and income.
■ H&R REIT (TSX: HR.UN) has a portfolio of 38 office properties, 156 retail properties, 101 industrial properties, 12 residential properties and four development projects. This real estate investment trust is well diversified geographically and by asset class, which helps provide stable financial results. It’s attractively valued compared to our other REITs, and it also yields a higher-than-average 6.0 per cent. It’s a buy for growth and income.
This is an edited version of an article that was originally published for subscribers in the April 7, 2017, issue of Money Reporter. You can profit from the award-winning advice subscribers receive regularly in Money Reporter.
Money Reporter, MPL Communications Inc.
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